Training is an essential part of company strategy. In this five-part survey Diane Coyle examines our attitudes to investing in training and the effectiveness of government schemes and business school techniques.
Companies are putting more effort into training nowadays. However, the recession, badly thought out schemes and class issues are proving setbacks.
When asked if British companies' training record had really improved as much as we are being led to believe one small businessman exploded, "Any company worth its salt has spent money on training."
Certainly, until about a year ago, all the anecdotal evidence indicated that the training budget was no longer the first to be axed in a downturn, ahead of advertising and executive expense accounts. There has indeed been a huge increase in the number of people receiving job-related training during the last decade or so, up from 2.6 million in 1984 to 4.3 million in 1991. The CBI backs up these statistics with its estimate that employers currently spend over £20 billion a year on training.
Unfortunately, it is now clear that the recession has gnawed its way through the fat to the bones and sinews of British business. A recent Department of Employment analysis of the latest Labour Force Survey recorded a drop of around 177,000 between 1990 and 1991 in the number of people receiving training - the first decline since it started counting in 1984. Other surveys indicate a further fall during the past year.
Despite this news most people in business still claim that there has been a revolution in boardroom attitudes to training. Ruth McGillicuddy of the CBI's Training Policy Group says, "The Training and Enterprise Councils (Tecs) have done a tremendous job in raising the awareness of employers. The Investors in People (IiP) scheme, launched in 1990, is the culmination of CBI and Tec efforts to raise training consciousness among their members. To win this accolade a company has to show that it carries out regular and effective training of all employees in the normal course of its business. By mid-1992 there were 77 IiP firms, including big names such as Boots, Unilever and Shell, and over 1,200 had committed themselves to meeting the standards.
Yet there is no doubt that investing in people is lower down the boardroom agenda than investing in machinery. The East Lancashire Tec has pointed out in a discussion paper on the IiP scheme that this is partly because there are fiscal incentives for the latter, whereas the former is simply a burden in the eyes of the finance director. A corporation tax credit for investment in human capital would even this up, the Tec argues.
Professor Sig Prais of the National Institute for Economic and Social Research thinks the burden of making further improvements in training provision should not be dumped on the shoulders of companies. For more than a decade, he, with his researchers, has visited factories, offices, shops, schools and colleges across the Continent, making detailed assessments of training standards. Britain has almost always come off worst in the comparison - it even appears that the French are better shopkeepers than Britons.
Prais argues that the most pressing issue is the need to reform the system of National Vocational Qualifications (NVQs). NVQs embody standards of achievement at different levels in a wide range of occupations. They represent the first uniform national standards outside narrow fields, drawn up by accredited industry bodies, and as such have been widely welcomed by employers. But, as things stand, companies are not only often responsible for assessing their own youth trainees, they also get a financial bonus from the Government for passing them. "Most employers will not talk frankly about it because they have financial incentives to support the system, but the qualifications do not command respect," says Prais. "The National Council for Vocational Qualifications (NCVQ) has led the country up a gum tree."
nother concern about NVQs has been raised by Institute of Manpower Studies researcher Claire Callender. She argues that they are too job-specific, serving the needs of particular employers rather than the need for flexibility in the economy as a whole. A second problem highlighted by Sig Prais is basic education. The National Institute team has countless examples of its failings. For instance, the average Swiss 14-year-old is more accomplished in technical drawing than 16-year-old school-leavers in Britain. Shortcomings like this in basic schooling make it more expensive for British employers to train school-leavers.
Cost is a third issue. British trainees are paid a far higher proportion of the adult wage than is the case elsewhere. In Switzerland, for instance, a trainee earns only one-fifth of the adult rate and is more likely to be trained off-the-job for as much as a year. "Why should any employer put money into it, paying wages for a year of work and not see anything? It is an irrational scheme," argues Prais.
So it is hardly surprising that despite the improvements they have made during the past decade British companies, especially small firms, still spend far less on training than their European competitors. A Cranfield/3i survey has found that small and medium enterprises in Britain are spending about 0.5% less of their turnover on training than similar companies in other EC countries. In France, where there is a compulsory training levy of 1% of the wage bill, small firms spend over 1.75% of their turnover on training. Spanish companies almost match the French. Professor Neil Cross of 3i commented: "It is significant that in a country like Spain, where industry is reorganising itself rapidly, the smaller and medium-sized companies are investing substantially in training."
Another aspect of training levels in Britain is that they reflect class-consciousness. According to the Department of Employment, nearly two-thirds of those getting job-related training already have A levels. Five times as many professionals as plant and machine operatives are receiving further training. And the highest proportions of employees in training are to be found in the financial services industry and other services. Britain has proportionately more PhDs in engineering than other industrial countries, but the National Institute team estimates that if Britain wants to match German standards of qualification in engineering and technology at the lower levels, we should be training an extra 80,000 people a year to BTEC National Certificate or City and Guilds standards. These figures show that change in corporate attitudes falls short of revolutionary.